Tapping Latin America's Lithium

Spanish Conquistadors once roamed Latin America's lush landscape in search of gold. In today's Latin America, lithium compounds in dry salt lakes have replaced romantic visions of golden cities as the object of desire. However, there are important strategies and precautions that all foreign investors should observe when deciding to invest in Latin America's lithium resources.

Today, most of the world's lithium comes from dry salt lakes in Latin America (called "salares"). Although much of Latin America's lithium reserves are located in Chile, Argentina and Bolivia, Mexico is quickly becoming a new power player in this vast, expanding market.

At the earliest stage, investors must take into account Latin America's complex—and often foreboding—political climate. Bolivia's tempestuous political environment tends to deter investors. In contrast, Mexico has become an ideal place for potentially low-cost, wide-scale extraction and production, with tariff-free trade agreements with 25 countries, low labor costs and low taxes. Moreover, since Mexico is a party to NAFTA, the channels of distribution to the rest of the Americas are wide open.

Attention should be paid to the ownership rights of the salt lake deposits themselves. Many salares are in remote locales and not easily accessible. Foreign investors may therefore prefer to work with multinational mining companies that have already acquired ownership of large quantities. It is also important to determine whether investors will be acquiring the entire ownership interest or merely entering into a joint venture with the local owners.

Latin America's abundant lithium reserves make the region a highly attractive destination for international investment. Vast differences in language, culture, and legal systems, however, make such investments a challenging endeavor. Potential investors should not be deterred, but should retain legal counsel that understands the applicable laws and has a keen cultural awareness.